Ice Company uses a percentageofnetsales method to account fo

Ice Company uses a percentage-of-net-sales method to account for estimated bad debts. H 3 percent of net sales have proven to be uncollectible. During 2014 and 2015, the company reported Glacier istori- the following: Acc 2015 $1,500,000 $%1,8 twc 2014 Gross sales Sales discounts Sales returns $1,800,000 100,000 130,000 20,000 50,000 REQUIRED: a. Prepare the necessary adjusting entry on December 31, 2014, to record the estimated bad debt expense for 2014 b. Assume that the January 1, 2014, balance in allowance for doubtful accounts was $65,000 (credit) and that $70,000 in bad debts were written off the books during 2014. What is the December 31, 2014, bal- ance in this account after adjustments? c. Prepare the necessary adjusting entry on December 31, 2015, to record the estimated bad debt expense for 2015. d. What is the December 31, 2015, balance in allowance for doubtful accounts? Assume that $85,000 in bad debts was written off the books during 2015.

Solution

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	$                2,014	$                2,015
Sales	$        1,800,000	$        1,500,000
Sales Discounts	$            130,000	$            100,000
Sales Returns	$              20,000	$              50,000
Net Sales	$        1,650,000	$        1,350,000